Bushfires, cyclones, hailstorms and flooding have been prevalent across the nation, with each event bringing destruction and damage bills. Natural disasters cost Australians more $13 billion a year, on average, and many people spend years recovering from a single event.
The Black Summer Bushfires (September 2019 to March 2020) was one of the worst bushfire seasons on record – 33 people lost their lives, over a billion animals perished, around 24 million hectares of land was burnt, and 3094 homes were destroyed across New South Wales, Victoria, Queensland, the ACT, Western Australia and South Australia. It also levelled a hefty damage bill $1.866 million in insured losses, according to PERILS.
MOTHER NATURE ON A ROLL
In the past 12 months, the Insurance Council of Australia (ICA) has declared four catastrophes and each was weather related – Cyclone Seroja, Perth Hills bushfires (1000 claims, $88 million), March floods in NSW and south east Queensland (42,000 claims, $624 million) and the Halloween hailstorm (41,000 claims, $976 million).
There seems little chance that the number of natural catastrophes will diminish in the years ahead.
According to the CSIRO/BOM State of the Climate 2020 report, Australia’s warming climate (warming by 1.44 ± 0.24 °C on average since national records began in 1910) will bring more extreme weather events: floods caused by more intense rainfall and rising sea levels; wind and rain damage from more intense tropical cyclones; and increased bushfires because of hotter, drier weather in southern Australia. There has been an increase in extreme fire weather, and in the length of the fire season, across large parts of the country since the 1950s.
The nation’s propensity for suffering natural disasters is well documented and mitigating the risk of loss and damage has been a priority for governments and communities for decades. There are many areas to look at – from land development to infrastructure, emergency responses to financial aid.
DESIGN AND CONSTRUCTION CRUCIAL
Also crucial is the design and construction of homes. Following the Royal Commission into National Disaster Arrangements, the ICA and MBA have joined forces to host the Building Stronger Homes Roundtables. Attended by builders and insurers from across the country, representatives of the property, banking, real estate and architecture industries, and government departments and agencies, the roundtables are looking to develop proposals to improve the resilience and insurability of existing and future homes.
Building resilience into properties to help mitigate the risk of damage from temperature increases and heatwaves, bushfires, cyclones and extreme wind, severe thunderstorms and high-intensity rainfall events, flooding, sea level rise, storm surge, and low rainfall is of increasing importance for the insurance industry – to ensure risks are effectively managed so that cover can be offered and premiums can remain affordable.
CHECK WHAT’S INSURED AND WHAT’S NOT
Insurance enables landlords to financially protect their investment against a range of extreme weather events. A good landlord insurance policy should provide cover against key environmental events/perils – bushfire, tropical cyclones, severe wind, floods, storms and hailstorms. Word to the wise: A number of environmental conditions are uninsurable, as the damage/loss is not the result of a single ‘insured event’ (like a fire would be). An example is coastal erosion, as this is gradual.
Insuring the rental is important, but it is just as important to check that the policy actually covers the weather risks the property faces. To find out what specific risks exist at the address, your landlords should talk to their local council. Most state governments also have tools available, such as Queensland’s FloodCheck or WA’s map of Bush Fire Prone Areas.
If the property is at risk of a particular natural peril (such as flooding, cyclone or bushfire), this may impact insurance cover. There may be restrictions or exclusions on policies, or higher-than-usual premiums, as most insurance providers decide if they will offer cover at a particular property, and at what cost, based on risk at the individual property level.
Not all insurers cover all environmental risks. Some risks may be outright exclusions, such as loss or damage caused by an act of the sea.
Other risks might be offered as optional extras and have a higher premium. For example, flood cover is not standard in all landlord insurance policies. Some insurers will not cover the risk at all, especially for owners of properties in flood-prone areas, others allow owners to ‘opt out’ or ‘opt in’. At EBM RentCover, all landlord policies automatically include flood cover.
Checking under what conditions certain events are and aren’t covered is also really important – for clients who are taking out cover and for you if you are helping them make a claim. For example, some insurers only cover flood damage resulting from rain. And, while bushfire is generally covered, loss or damage to any item caused by scorching, melting or charring without flames, is usually not.
PROTECTING OUR PROPERTIES
As Australia’s environmental conditions change, we’ll need to bushfire, flood and storm-proof our properties and generally find ways to create a ‘buffer’ against loss and damage caused by extreme weather events.
One very important buffer is having the right insurance cover. By the way, a policy needs to be in place before an extreme weather event hits. Most insurers apply an embargo on accepting new policies in certain areas, or under some circumstances, such as when an event is known to be extremely likely or is already having an impact.
Every investor wants a secure investment. But not everything always goes to plan and some events simply can’t be controlled (like the wrath of Mother Nature). What can be controlled is whether your landlord clients are protected by the right landlord insurance.